U.S. oil prices continued to sink Wednesday morning, falling to about $56 a barrel as China said it would match President Trump’s tariffs blow for blow.
The slide in crude prices signals deteriorating confidence in the strength of the economy. And while lower oil prices benefit consumers by, ultimately, reducing prices at the pump, they are a big problem for U.S. oil producers, many of which will struggle to make money drilling new wells at these levels.
Many companies are waiting to see whether prices remain between $50 and $60 before adjusting drilling or spending plans. That is because commodity prices can be very volatile. After all, oil fetched around $72 a barrel this time last week, before Mr. Trump ratcheted up tariffs on nearly all countries with which the United States trades goods.
But if prices fall further, to around $50 a barrel, U.S. oil production could decline by about 8 percent in a year, according to S&P Global Commodity Insights.
Peter Navarro, a trade adviser to Mr. Trump, has frequently cited the benefits of $50 a barrel oil, saying it would curb inflation.
The recent price slide has spooked U.S. oil executives, many of whom backed Mr. Trump’s campaign in hopes that he would open new areas for drilling and make it easier to secure permits for pipelines and other infrastructure.
“That’s a pretty expensive trade-off,” Dan Pickering, chief investment officer for Pickering Energy Partners, a Houston financial services firm, said on Friday.
It has been more than four years since oil prices were this low.
